In Ukraine Crisis Wake: Geopolitics and a Case for European LNG Import Terminals

The global LNG supply options are broadening with new LNG export projects – both under construction and proposed – mushrooming especially in Australia, the US, Canada, Papua New Guinea, Mozambique, Tanzania et cetera. Conceivably, a severe competition in the global LNG market is in the not so distant future. What impact this “golden age of gas” – as dubbed by the IEA – will have on global natural gas pricing – what is still a very regionalized affair with LNG exporters fetching the highest prices in the Asian market – is very much up in the air. However, clear are the additional benefits for energy security globally.

According to the BP Statistical Review of World Energy (June 2014), Russian natural gas production volume came in at 604.8 billion cubic meters (bcm) in 2013, second only to the US with a total of 687.6 bcm. Moreover, as for natural gas exports via pipeline, Russia registered a substantial overall year-over-year increase of 17.1 bcm to 211.3 bcm in 2013, thereby strengthening its position as the largest natural gas exporter in the world. However, it is notable that European LNG imports dropped by 16.8 bcm to 51.4 bcm in 2013, while Asian LNG imports in 2013 rose by 13.5 bcm to 238.1 bcm. These figures indicate that demand growth is driven by the Asia-Pacific region and, at the same time, illustrate Asia’s importance in current and especially future international LNG trade.

With respect to the above chart, the IEA cautions in its World Energy Investment Outlook 2014 that even though the “over $700 billion invested in LNG infrastructure helps to globalise gas markets, (…) the high cost of transporting gas dampens importers’ hopes for much cheaper gas.” This crucial point has also been stressed in reference to Europe by Elizabeth Rosenberg, Senior Fellow and Director of the Energy, Environment and Security Program at the Center for a New American Security, in a recent testimony before the Senate Committee on Energy & Natural Resources...